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I am currently working as U.S. DoD contractor in Afghanistan. I arrive in Afghanistan late October 2010. I will be over here until at least October 2011. I know that when working overseas for 330 days or more, the first about 90 thousand dollars are tax-free.

What I don't know is how to fill my tax for the 2010 year. At the end of the year, I wouldn't have been over here for more than 330 days. So I wont get the tax break. At least that is how I understand it. Is this correct? If so, will I receive my take break for the 2011 year if I am not overseas for more than 330 days of 2011? Even if I have served overseas 330 days of the last 365 days?

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My husband had this come up when he went to Kuwait from August2006 - August 2007. Its all based on the percentage of the time. So say the first 90k is taxfree. If you were there 3 months of that tax year then 25% of 90,000 is your "tax-free" income and the rest of the money earned in those 3 months is taxed at the appropriate tax bracket rate. Then the following year you take the other 75% (67,500) free and tax the rest. You will have to pay your estimated taxes and file an extension for the first year so that you can prove the 330/365 days to the IRS. Get a really good accountant or you will still be paying taxes and penalties years later like we are.

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  • Thank you so much... I heard stories what I need to do, but never got any answer with proof. Thank you so much.
    – SgtOJ
    Dec 15, 2010 at 20:14

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